What has tax got to do with Development: A Critical look at Mozambique’s and Zimbabwe’s tax systems

Eurodad partner organisation AFRODAD has released two new publications on the role of tax in African development:

The link between development and taxation has come up in various fora as development practitioners and activists discussed methods of mobilisation of domestic resources for financing development in the South especially the need to finance the Millennium Development Goals (MDGs). Tax revenues are, on average, lower in developing countries than in rich countries; the average revenue in African countries was approximately 15% of GDP in 2008. Hence the argument that if developing countries were able to collect sufficient tax revenues, they might be able to increase their independence, the provision of social protection, infrastructure and basic services such as education and health care which are crucial for development.

The reports reveal that mobilising domestic resources as a means to financing development has become an important development issue, a shift from the past emphasis on financing development from aid and external borrowing. For a long time mobilizing domestic revenue has been neglected, despite being a better long-term option. The reasons for this included the inherent pessimism about raising revenue, a prevalent ‘small-state’ ideology and a preference for foreign aid-led solutions. Taxation is a major tenet of any domestic resource mobilisation tools at the disposal of developing countries. Taxation also plays an important role in shaping the distribution of benefits from higher income citizens to those most in need in a country.

The reports also examine the various complexities surrounding taxation as a development finance mechanism in the two country cases including the current tax framework, the amount and extent of tax evasion and more specifically tax incentives and governance in various sectors of the economy. The reports also proffers actionable policy and institutional recommendations to the governments of Mozambique and Zimbabwe and civil society for the betterment of the tax systems. AFRODAD hopes that the Mozambican and Zimbabwean governments and other civil society organisations will take seriously matters arising in this report.